SOURCE: NuVasive, Inc.

NuVasive, Inc.

March 03, 2014 16:30 ET

NuVasive Reports Fourth Quarter and Full Year 2013 Financial Results

SAN DIEGO, CA--(Marketwired - Mar 3, 2014) - NuVasive, Inc. (NASDAQ: NUVA)

  • Fourth quarter 2013 total revenue of $190.8 million; up 15.1% from fourth quarter 2012

  • Full year 2013 total revenue of $685.2 million; up 10.5% from full year 2012

  • GAAP operating margin of 7.9% for the fourth quarter 2013 and 4.8% for the full year 2013

  • Non-GAAP operating margin of 16.3% for the fourth quarter 2013 and 14.9% for the full year 2013

  • GAAP net earnings of $6.0 million, or $0.13 per share, for the fourth quarter 2013 and GAAP net earnings of $7.9 million, or $0.17 per share, for the full year 2013

  • Non-GAAP earnings of $17.8 million, or $0.37 per share, for the fourth quarter 2013 and $57.4 million, or $1.23 per share, for the full year 2013

NuVasive, Inc. (NASDAQ: NUVA) a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter and for the full year ended December 31, 2013.

Alex Lukianov, Chairman and Chief Executive Officer, said, "2013 results clearly demonstrate that NuVasive's market share taking strategy is thriving. Importantly, we are cultivating the drivers that will support top and bottom line growth for many years to come. We are leveraging our unrivaled years of experience and research to continue championing the global market conversion toward less invasive spine solutions. And our commitment to innovation has conceived a pipeline that may dwarf all that we have accomplished so far. Onward and Upward!"

NuVasive reported fourth quarter 2013 revenue of $190.8 million, a 15.1% increase over the $165.8 million for the fourth quarter 2012 and a 12.8% increase over the $169.2 million reported for the third quarter 2013. The Company reported full year 2013 revenue of $685.2 million, a 10.5% increase over the $620.3 million reported for full year 2012.

Gross profit for the fourth quarter 2013 was $141.5 million and gross margin was 74.1%, compared to a gross profit of $123.6 million and a gross margin of 74.5% for the fourth quarter 2012. For the third quarter 2013, gross profit was $125.9 million and gross margin was 74.4%. Gross profit for the full year 2013 was $504.7 million and gross margin was 73.7%, compared to a gross profit of $466.8 million and gross margin of 75.3% for the full year 2012.

Total operating expenses for the fourth quarter 2013 were $126.4 million compared to $119.4 million in the fourth quarter 2012 and $114.3 million in the third quarter 2013. Full year 2013 operating expenses were $471.6 million compared to $429.8 million reported for the full year 2012. The higher operating costs for the fourth quarter and full year 2013 resulted primarily from spending to support international infrastructure expansion and higher revenue. 

On a GAAP basis, the Company reported net income of $6.0 million, or $0.13 per share, for the fourth quarter 2013, and net income of $7.9 million, or $0.17 per share for the full year 2013. 

On a Non-GAAP basis, the Company reported net income of $17.8 million, or $0.37 per share, for the fourth quarter 2013, and net income of $57.4 million, or $1.23 per share, for the full year 2013. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $9.2 million and $33.2 million; (ii) certain intellectual property litigation expenses of $1.8 million and $5.7 million; (iii) amortization of intangible assets of $5.1 million and $19.3 million; (iv) acquisition related items of $42 thousand and $2.6 million; (v) non-cash interest expense on convertible notes of $3.5 million and $13.7 million; and (vi) a one-time out of period royalty expense charge related to royalty accruals in connection with Phase I of the company's patent litigation with Medtronic of $7.9 million recorded in the second quarter 2013.

Cash, cash equivalents and short and long-term marketable securities were approximately $326 million at December 31, 2013.

2014 Full Year Financial Guidance

  • Revenue of approximately $725 million;
  • GAAP EPS of approximately $0.11;
  • Non-GAAP EPS of approximately $1.06;
  • Non-GAAP Operating Margin of approximately 16%;
  • GAAP effective tax expense of approximately $19 million, which includes the impact of our Globalization Initiative

Supplementary Financial Information

For additional financial detail, please refer to the Supplementary Financial Information provided by CLICKING HERE or by visiting the Investor Relations section of our website at www.nuvasive.com.

     
Reconciliation of Full Year EPS Guidance
     
2014 Guidance 1
 
GAAP earnings per share   $ 0.11
Non-cash stock based compensation     0.43
Certain intellectual property litigation expenses     0.06
Amortization of intangible assets     0.19
Leasehold termination charge     0.08
Acquisition related items 2     0.01
Non-cash interest expense on convertible notes     0.18
Non-GAAP earnings per share   $ 1.06
       
Weighted shares outstanding - basic     47,500
Weighted shares outstanding - diluted     50,000
 
1Effective tax expense rate of ~80% applied to GAAP earnings and 40% applied to Non-GAAP adjustments
2Acquisition related items include expenses associated with prior M&A related activity and as incurred
 
 
             
Reconciliation of Non-GAAP Operating Margin %  
             
    2013
Actuals
    2014 Guidance  
   
Non-GAAP Gross Margin % [A]   74.8 %   76.0 %
Non-cash stock based compensation   0.0 %   0.0 %
Out-of-period royalty expense charge   -1.1 %   0.0 %
GAAP Gross Margin [D]   73.7 %   76.0 %
             
Non-GAAP Sales, Marketing & Administrative Expense [B]   55.9 %   54.5 %
Non-cash stock based compensation   4.6 %   4.8 %
Certain intellectual property litigation expenses   0.8 %   0.7 %
Leasehold termination charge   0.0 %   0.9 %
Acquisition related items*   0.0 %   0.1 %
GAAP Sales, Marketing & Administrative Expense [E]   61.3 %   61.0 %
             
Non-GAAP Research & Development Expense [C]   4.1 %   5.5 %
Non-cash stock based compensation   0.2 %   0.2 %
Acquisition related items*   0.4 %   0.1 %
GAAP Research & Development Expense [F]   4.7 %   5.8 %
             
Amortization of intangible assets [G]   2.8 %   2.2 %
             
Non-GAAP Operating Margin % [A-B-C]   14.9 %   16.0 %
             
GAAP Operating Margin % [D-E-F-G]   4.8 %   7.0 %
             
 
* Acquisition related items include expenses associated with prior M&A activity and as incurred
 
 

Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, leasehold termination charge, acquisition related items, non-cash interest expense on convertible notes, and an out of period royalty expense charge. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These Non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from Non-GAAP measures used by other companies. Set forth below are reconciliations of the Non-GAAP financial measures to the comparable GAAP financial measure.

             
Reconciliation of Fourth Quarter 2013 Results
             
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax   Earnings Per Share
GAAP net income         $ 6,009   $ 0.13
  Non-cash stock-based compensation   $ 9,238     5,542     0.12
  Certain intellectual property litigation expenses     1,765     1,060     0.02
  Amortization of intangible assets     5,063     3,037     0.06
  Acquisition related items     42     24     0.00
  Non-cash interest expense on convertible notes     3,508     2,106     0.04
                   
Non-GAAP earnings         $ 17,778   $ 0.37
                   
                   
Weighted shares outstanding - diluted                 47,947
                   
                   
             
             
             
Reconciliation of Full Year 2013 Results
             
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax   Earnings Per Share
GAAP net income         $ 7,902   $ 0.17
  Non-cash stock-based compensation   $ 33,240     19,944     0.43
  Certain intellectual property litigation expenses     5,728     3,437     0.07
  Amortization of intangible assets     19,326     11,596     0.25
  Acquisition related items     2,576     1,545     0.03
  Non-cash interest expense on convertible notes     13,656     8,194     0.18
  Out-of-period royalty expense charge     7,901     4,741     0.10
                   
Non-GAAP earnings         $ 57,358   $ 1.23
                   
Weighted shares outstanding - diluted                 46,786
                   
                   

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available on our website, at www.nuvasive.com in the Investor Relations Section.

After the live webcast, the call will remain available on NuVasive's website through April 2, 2014. In addition, a telephonic replay of the call will be available until March 17, 2014. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number 13574396.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 4th largest player in the $8.7 billion global spine market.

NuVasive offers a comprehensive spine portfolio of over 90 unique products developed to improve spine surgery and patient outcomes. The Company's principal procedural solution is its Maximum Access Surgery, or MAS® platform for lateral spine fusion. MAS provides safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

Having pioneered the lateral approach to spine fusion, NuVasive continues to be at the forefront of the spine industry's shift toward less invasive solutions. The Company's dedication to innovation continues to spawn game changing technology such as the PCM® motion preserving disc for the cervical spine, XLIF® Corpectomy for tumor and trauma, and Armada®, which treats adult degenerative scoliosis in a less invasive fashion. The Company has also developed procedural solutions that completely redefine and improve upon traditional procedures like TLIF, PLIF, Posterior Fixation, and ALIF. NuVasive's solutions are increasingly being adopted internationally, as the Company lays the groundwork to continue growing as a global business and to offer industry-leading, Absolutely Responsive customer service to surgeons world-wide. NuVasive is focused on becoming a $1 Billion Start-Up™; taking market share by maintaining a commitment to Superior Clinical Outcomes, Speed of Innovation®, and Absolute Responsiveness®.

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive's revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and other risks and uncertainties more fully described in NuVasive's press releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

 
NuVasive, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
 
                         
    Three Months Ended December 31,     Year Ended December 31,  
    2013     2012     2013     2012  
    (Unaudited)     (Unaudited)     (Unaudited)        
Revenue   $ 190,815     $ 165,754     $ 685,173     $ 620,255  
Cost of goods sold (excluding amortization of purchased technology)     49,353       42,196       180,484       153,409  
Gross profit     141,462       123,558       504,689       466,846  
                                 
Operating expenses:                                
  Sales, marketing and administrative     113,821       97,713       420,064       372,416  
  Research and development     7,555       8,398       32,209       35,296  
  Amortization of intangible assets     5,063       3,600       19,326       12,430  
  Impairment of goodwill and intangible assets     -       9,700       -       9,700  
Total operating expenses     126,439       119,411       471,599       429,842  
                                 
Interest and other expense, net:                                
  Interest income     195       254       755       915  
  Interest expense     (6,782 )     (7,028 )     (27,178 )     (27,710 )
  Other income, net     164       901       3,101       1,047  
Total interest and other expense, net     (6,423 )     (5,873 )     (23,322 )     (25,748 )
                                 
Income (loss) before income taxes     8,600       (1,726 )     9,768       11,256  
Income tax expense     2,763       1,050       2,783       8,814  
Consolidated net income (loss)   $ 5,837     $ (2,776 )   $ 6,985     $ 2,442  
Net loss attributable to noncontrolling interests   $ (172 )   $ (30 )   $ (917 )   $ (702 )
Net income (loss) attributable to NuVasive, Inc.   $ 6,009     $ (2,746 )   $ 7,902     $ 3,144  
                                 
Net income (loss) per share attributable to NuVasive, Inc.:                                
  Basic   $ 0.13     $ (0.06 )   $ 0.18     $ 0.07  
  Diluted   $ 0.13     $ (0.06 )   $ 0.17     $ 0.07  
Weighted average shares outstanding:                                
  Basic     44,820       43,628       44,461       43,328  
  Diluted     47,947       43,628       46,786       44,272  
                                   
                                   
 
NuVasive, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
    December 31,  
    2013     2012  
ASSETS   (Unaudited)        
Current assets:                
  Cash and cash equivalents   $ 102,825     $ 123,299  
  Short-term marketable securities     143,449       138,405  
  Accounts receivable, net     104,774       88,958  
  Inventory     136,937       126,364  
  Deferred tax assets, current     37,076       28,236  
  Prepaid expenses and other current assets     10,947       8,487  
Total current assets     536,008       513,749  
Property and equipment, net     128,064       125,123  
Long-term marketable securities     79,829       84,412  
Intangible assets, net     93,986       101,362  
Goodwill     154,944       154,106  
Deferred tax assets     42,863       40,575  
Restricted cash and investments     119,195       118,995  
Other assets     24,679       25,463  
Total assets   $ 1,179,568     $ 1,163,785  
LIABILITIES AND EQUITY                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 86,057     $ 62,048  
  Accrued payroll and related expenses     31,095       27,916  
  Senior Convertible Notes, current     -       74,311  
Total current liabilities     117,152       164,275  
Senior Convertible Notes     346,060       332,404  
Deferred tax liabilities     2,934       3,129  
Litigation liability     93,700       101,200  
Other long-term liabilities     14,844       15,199  
Commitments and contingencies                
Noncontrolling interests     -       10,003  
Stockholders' equity:                
  Preferred stock     -       -  
  Common stock     45       44  
  Additional paid-in capital     769,203       714,865  
  Accumulated other comprehensive (loss) income     (3,238 )     786  
  Accumulated deficit     (170,218 )     (178,120 )
Total Nuvasive, Inc. stockholders' equity     595,792       537,575  
Noncontrolling interests     9,086       -  
Total equity     604,878       537,575  
Total liabilities and equity   $ 1,179,568     $ 1,163,785  
                 
                 
 
NuVasive, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
    Year Ended December 31,  
    2013     2012     2011  
    (Unaudited)              
Operating activities:                        
Consolidated net income (loss)   $ 6,985     $ 2,442     $ (71,021 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
  Depreciation and amortization     63,106       51,909       36,242  
  Deferred income tax (benefit) expense     (11,341 )     4,525       (30,967 )
  Amortization of debt discount     13,656       12,697       6,108  
  Amortization of debt issuance costs     1,680       1,872       1,816  
  Stock-based compensation     33,240       26,312       32,070  
  Impairment of goodwill and intangible assets     -       9,700       18,167  
  Loss on repurchase of Senior Convertible Notes, net     -       -       332  
  Gain recognized on change in fair value of derivatives     -       -       (2,387 )
  Allowance for doubtful accounts and sales return reserves     959       103       1,345  
  Allowance for excess and obsolete inventory, net of write-offs     6,509       5,475       6,028  
  Other non-cash adjustments     7,116       7,283       6,227  
Changes in operating assets and liabilities, net of effects from acquisitions:                        
  Accounts receivable     (17,384 )     (2,005 )     (9,929 )
  Inventory     (21,002 )     (11,022 )     (17,170 )
  Prepaid expenses and other current assets     (3,608 )     12,725       (14,396 )
  Accounts payable and accrued liabilities     21,803       2,938       (3,385 )
  Litigation liability     (7,500 )     -       101,200  
  Accrued payroll and related expenses     3,220       5,128       2,685  
Net cash provided by operating activities     97,439       130,082       62,965  
Investing activities:                        
Cash paid for business and asset acquisitions     (14,818 )     (11,088 )     (37,574 )
Purchases of property and equipment     (47,597 )     (41,189 )     (53,370 )
Purchases of marketable securities     (218,454 )     (235,919 )     (253,210 )
Sales of marketable securities     216,299       246,504       151,966  
Purchases of restricted investments     -       (113,281 )     (4,536 )
Sales of restricted investments     -       7,079       -  
Payment for specific rights in connection with supply agreement, net of refund received     -       -       (5,000 )
Net cash used in investing activities     (64,570 )     (147,894 )     (201,724 )
Financing activities:                        
Proceeds from the sale of warrants     -       -       47,898  
Proceeds from the issuance of convertible debt, net of issuance costs     -       -       391,445  
Purchase of convertible note hedges     -       -       (80,097 )
Principal payment of 2013 Senior Convertible Notes     (74,311 )     -       -  
Repurchase of 2013 Senior Convertible Notes     -       -       (154,164 )
Tax benefits related to stock-based compensation awards     13,569       3,003       463  
Proceeds from the issuance of common stock     8,422       4,884       6,852  
Payment of contingent consideration     -       (29,722 )     (1,800 )
Other assets     (162 )     (721 )     (718 )
Net cash (used in) provided by financing activities     (52,482 )     (22,556 )     209,879  
Effect of exchange rate changes on cash     (861 )     175       (225 )
(Decrease) increase in cash and cash equivalents     (20,474 )     (40,193 )     70,895  
Cash and cash equivalents at beginning of year     123,299       163,492       92,597  
Cash and cash equivalents at end of year   $ 102,825     $ 123,299     $ 163,492  
                         
                         

Contact Information

  • Investor Contact:
    Tina Jacobsen
    NuVasive, Inc.
    858-320-5215
    Email Contact

    Media Contact:
    Nicole Collins
    NuVasive, Inc.
    858-909-1907
    Email Contact